TCG BDC INC (NASDAQ: CGBD) and NewStar Financial (NASDAQ:NEWS) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, profitability, dividends, valuation, analyst recommendations, risk and earnings.
Dividends
TCG BDC INC pays an annual dividend of $1.48 per share and has a dividend yield of 8.0%. NewStar Financial pays an annual dividend of $0.08 per share and has a dividend yield of 0.7%. NewStar Financial pays out 14.5% of its earnings in the form of a dividend.
Analyst Recommendations
This is a summary of recent recommendations and price targets for TCG BDC INC and NewStar Financial, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| TCG BDC INC | 0 | 0 | 4 | 0 | 3.00 |
| NewStar Financial | 0 | 1 | 0 | 0 | 2.00 |
TCG BDC INC presently has a consensus price target of $19.13, suggesting a potential upside of 3.88%. NewStar Financial has a consensus price target of $11.00, suggesting a potential upside of 1.29%. Given TCG BDC INC’s stronger consensus rating and higher probable upside, equities analysts clearly believe TCG BDC INC is more favorable than NewStar Financial.
Profitability
This table compares TCG BDC INC and NewStar Financial’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| TCG BDC INC | N/A | N/A | N/A |
| NewStar Financial | 8.65% | 3.76% | 0.60% |
Valuation & Earnings
This table compares TCG BDC INC and NewStar Financial’s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| TCG BDC INC | N/A | N/A | N/A | N/A | N/A |
| NewStar Financial | $95.31 million | 4.74 | $22.88 million | $0.55 | 19.75 |
NewStar Financial has higher revenue and earnings than TCG BDC INC.
Insider & Institutional Ownership
2.3% of TCG BDC INC shares are held by institutional investors. Comparatively, 74.6% of NewStar Financial shares are held by institutional investors. 0.1% of TCG BDC INC shares are held by insiders. Comparatively, 8.1% of NewStar Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
Summary
NewStar Financial beats TCG BDC INC on 6 of the 11 factors compared between the two stocks.
TCG BDC INC Company Profile
TCG BDC, Inc., formerly Carlyle GMS Finance, Inc., is a managed and non-diversified closed-end investment company. The Company is focused on lending to middle market companies. The Company’s investment objective is to generate current income and capital appreciation primarily through debt investments in the United States and middle market companies. The Company seeks to achieve its investment objective primarily through direct originations of secured debt, including first lien senior secured loans and second lien senior secured loans. The Company’s first lien senior secured loans include stand-alone first lien loans, first lien/last out loans, and unitranche loans. Second lien senior secured loans (Middle Market Senior Loans), with the balance of its assets invested yielding in higher investments include unsecured debt, mezzanine debt and investments in equities. The Company’s investment adviser is Carlyle GMS Investment Management L.L.C.
NewStar Financial Company Profile
NewStar Financial, Inc. (NewStar) is a commercial finance company. The Company operates through two segments: Commercial Lending and Asset Management. The Commercial Lending segment represents its direct lending activities, which are focused on providing a range of flexible senior secured debt options to mid-sized companies. The Asset Management segment represents its investment advisory activities, which are focused on providing opportunities for qualified investors to invest in a range of credit funds managed by the Company. The Company’s direct lending activities are focused on meeting the financial needs of companies and private investors in the middle market by offering a range of debt financing options. Through its asset management platforms, NewStar offers a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.
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